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  • Keshav Kolur

The CONS of Multifamily Real Estate Syndication

Updated: Oct 27, 2022

"weigh the pros and cons"


In the previous article, we discussed the pros of multi-family real estate syndication which is generally a great way to get involved in the industry with less risk and less capital.


While syndication can be a great way to get into the real estate market by pooling your money with other investors to buy bigger and better properties, there are some drawbacks you should consider before jumping in.


In this article, we'll take a look at the cons of investing via real estate syndication so you'll be able to weigh the pros and cons


CON #1: Less control in your investment


When you invest in a real estate syndication, you are pooling your money with other investors to purchase a property. The syndicator will then manage the property and make all of the decisions related to its operation. This can be beneficial in terms of saving time and effort, but it also means that you will have less control over the property than if you were the sole owner and investor.


Additionally, when multiple investors are involved in a project, decision-making can become complicated and consensus may be difficult to reach. This can lead to delays in getting projects off the ground or making changes during a project.


CON #2: Illiquidity can be a major issue


One of the biggest risks in real estate investing is its illiquid nature. This means that it can be difficult to sell your investment if you need to access your money quickly.


For example, if you need to make a large purchase or invest in another opportunity, you may not be able to sell your share in the syndicated property


quickly enough to get the cash you need. This can create a major financial burden and put your investment at risk.


As a result, it's important to consider the level of liquidity you're comfortable with before investing in a syndicated property. If you're open to the possibility of having your money tied up for a while, then real estate syndication can be a great way to earn high returns. However, if you need access to your cash on a more regular basis, then you may want to look into other investment options such as the equity markets


CON #3: High income prerequisites


One of the conditions that must be met for somebody to invest in a real estate syndication is that the person must be an accredited investor. An accredited investor is defined as someone who earns an annual income of more than $200,000 or has a net worth of more than $1 million. This criterion excludes a large number of potential investors from participating in real estate syndications.


Another prerequisite for investing in a real estate syndication is that the investor must have a certain level of experience and knowledge about investing. This is because real estate syndications are complex investments and often involve a high degree of risk. Inexperienced investors are less likely to be able to properly assess the risks and potential rewards of investing in a real estate syndication. As a result, they may be more likely to lose money on their investment.


So, upon learning about the pros and cons of multi-family real estate syndication, should you invest? The answer is a resounding yes – but with caution. Make sure to weigh the pros and cons carefully before diving in, and always consult with an experienced real estate professional to help guide you through the process.


With careful planning and due diligence, syndicating can be a lucrative way to invest in real estate while maintaining some level of control over your investment.





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